81715
NEPAL:
COUNTRY PROGRAM SNAPSHOT
October 2013
RECENT ECONOMIC AND SECTOR DEVELOPMENTS
Summary
Nepal’s economic development remains Whether and how well Nepal manages the
contingent on political developments. Political political transition process will be a major
volatility and uncertainty continue to hamper determinant of economic progress going
growth-oriented fiscal policies while the private forward. With considerable uncertainty still
sector has adopted a wait-and-see position. Over surrounding the elections scheduled on November
the short term, the scheduled elections – whether 19 – whether they will be delayed and how
they are held and achieve a modicum of consensual the outcome will be – political
consensus – will be a major test. Over the developments will drive the outlook. If elections
medium term, increased political stability should are held successfully, both public and private
be followed by structural reforms to tackle investments are expected to pick up.
enduring sources of fragility, including financial
Important initiatives to improve the
sector consolidation, public financial management
governance environment have been taken,
reform, governance improvements, and a strategy
which could be amplified further. In past
to address the gradual erosion of Nepal’s external
months the government has taken substantive
competitiveness.
steps to address major bottlenecks to public
Political instability has clouded the outlook in expenditures and private sector development.
FY13 and remains the principal source of These include de facto streamlining of the budget
vulnerability going forward. The delayed preparation/adoption process, which could be
adoption of a full budget in FY13 has depressed further institutionalized, high profile anti-
public spending and affected investor sentiment, corruption initiatives (as part of a broader effort to
while agricultural activity has suffered from a strengthen PFM), and the establishment of the
weak monsoon. Overall economic growth is Investment Board Nepal, which appears poised to
estimated to have dipped to 3.6 percent, with approve transformational projects in coming
average inflation just under the double-digit mark. months.
Despite the drawbacks, Nepal’s fundamentals For FY14, the baseline scenario is a gradual
remain healthy. Despite a large – and growing – return to trend with higher growth and
trade imbalance, the current account remained in sustainable fiscal expansion. If elections are
surplus, thanks to the countervailing impact of held on time and the result achieves broad
remittances, which have continued to grow consensus, macroeconomic projections point to a
robustly (albeit at a slower pace than in past gradual return to trend with economic growth
years). On the fiscal side, the combined effect of returning to 4-4.5 percent and inflation remaining
low spending and continued impressive revenue in single digits. The government of Nepal has
growth has allowed the government to draw down ample scope to increase spending, while
its overall stock of debt. maintaining overall fiscal sustainability targets, an
opportunity that ought to be put to good use by
A critical source of weakness in past years, the
boosting capital spending.
financial sector has rebuilt strength. All key
indicators of financial sector health – credit- While important psychologically and for
deposit ratio, exposure to real estate, non- specific sectors of the economy, the Nepalese
performing loans (NPLs) – have registered rupee’s depreciation is not expected to hold
significant improvements, on the back of resolute back growth or threaten macroeconomic
policy interventions by the Nepal Rastra Bank stability. Nepal does not share the significant
(NRB; the central bank) and accommodative internal weaknesses of the Indian economy (twin
monetary policy. Further consolidation is needed, current account and fiscal deficits) and it has
however, with key policy actions still pending or important buffers against currency shocks, most
in progress, and the need possibly to adopt a notably strong remittance inflows. That said,
tighter monetary stance in coming months. specific sectors of the economy will suffer. Of
particular concern are: (i) the financial health of
major state owned enterprises, and (ii) possible sector is bound to have adversely impacted the
inflationary pressures, which will need to be incomes and consumption of some of the poorest
managed proactively. While a revision of the peg segments of the population.
with India may eventually be warranted, the
Industrial output performed marginally better
report concurs with Nepali policy makers that this
than the last two years, as structural bottlenecks
is not the time – when markets are unstable – to
were compounded by weak public demand and
move impulsively; instead, such a major policy
political uncertainty. Industrial growth in FY13
shift should be based on clear policy objectives
was a lackluster 1.6 percent, down sharply from
and in-depth analysis of likely economic
4.3 percent and 3.0 percent in FY11 and FY12.
outcomes, including the long term impact on
Manufacturing activity growth slowed to 1.8
Nepal’s trade competitiveness.
percent (from 3.6 percent the previous year) as
Growth unresolved structural bottlenecks were
compounded by political uncertainty. While
The overall growth rate for FY13 is estimated construction activity picked up from FY12 (1.6
to have been 3.6 percent, down from 4.9 percent vs. 0.2 percent growth) when the real
percent in FY12. This weak performance is estate bubble burst, it remained constrained by
essentially due to historically low levels of delays in budget execution, low levels of public
activity in both the agriculture and industrial spending on capital projects, restrictions on bank
sectors, which grew respectively at only 1.3 lending to the real estate sector, and investor
percent and 1.6 percent in FY13. For agriculture, nervousness over possible further price
this was the weakest performance of the past five corrections.
years and for industry an improvement only
The services sector, which accounts for an
relative to FY09, when industrial output
ever-growing share of total value added, was
contracted. By contrast, services growth reached 6
an outlier with a healthy 6.0 percent increase
percent, accounting for over 80 percent of total
over the 4.5 percent and 3.4 percent of the
GDP growth.
preceding years. Within the sector, wholesale &
retail trade (+9.5 percent), hotels & restaurants
(+6.8 percent), transport, storage & commu-
nications (+6.7 percent), and financial
intermediation (+6.6 percent) saw considerable
growth in FY13, whereas it was more muted in
the remaining sub-sectors, real estate and
public/community services. Services growth has
been unaffected by the deceleration in remittance
growth in FY13, possibly because of lag effects.
Low agricultural output reflected adverse
climatic shocks as well as undersupply of key Inflation
inputs. The agriculture sector, which accounts for
34.4 percent of gross value-added, grew by just Inflation rose to 9.9 percent in FY13, reversing
1.3 percent in FY13, compared to 5.0 percent and a trend of steady decrease since FY09. The rise
4.5 percent in FY12 and FY11. The impact of an was well above the NRB’s initial target of 7.5
unfavorable monsoon was compounded by percent (and mid-term revised targets of 9.5
shortages in chemical fertilizers during the peak percent). It remained near or above 10 percent
planting season as public procurement of until mid-March this year and moderated only in
fertilizers to be provided at subsidized prices was the last four months of the fiscal year because of
affected by delays in budget adoption, and seasonal trends, similar movements in Indian
informal cross border trade was unable to fill the prices, and the ability of firms to mobilize
gap. Beyond its impact on overall economic inventories. “Cost-push” factors kept prices high
growth, the poor performance of the agricultural in FY13: a disappointing harvest prompted a
surge in imported food (volumes of rice and transfers are also a lifeline allowing Nepal to
vegetables from India grew by 98 percent and 76 finance its trade deficit and maintain its current
percent); food prices rose by 9.7 percent, from 7.6 account balance.
percent in FY12; and non-food prices also
The current account remained in surplus in
increased to 10 percent from 9 percent the year
FY13, although by a smaller margin than in
before. Structural factors – supply side rigidities –
FY12. With a modest net surplus in services trade
were the main drivers: higher fuel and gas prices
(0.45 percent of GDP) and stable net income
that raised transport costs, and the onset of the
receipts (0.77 percent of GDP), the current
rupee’s depreciation against major convertible
account surplus recorded in FY13 (3.3 percent of
currencies, that drove up costs of imported goods,
GDP) is almost entirely attributable to net current
and domestic production via imported inputs and
transfers (29.3 percent of GDP). Transfers also
raw materials.
account for the steady build-up in gross official
reserves from USD 4.3 billion to USD 4.98
billion between FY12-13. Import coverage
remained at a comfortable 7.6 months of imports,
up from 7.2 in FY12.
Trade Fiscal Sector
Nepal’s trade balance continued to deteriorate, Nepal experienced a (real) fiscal contraction in
to a record 27.1 percent, in FY13, with adverse FY13. Significant delays in budget approval (a
developments in both exports and imports. full budget was adopted only in the fourth
Export growth decelerated to a mere 3.6 percent, quarter) depressed public spending, which grew
from 15.4 percent in FY12, while imports growth modestly in nominal terms (by 1.75 percent on a
rose to 20.6 percent compared to 16.5 percent the cash basis, excluding “financing” expenses) and
previous year. declined in real terms. Recurrent expenditures,
Growing remittance transfers are both a which accounted for 71 percent of total
driver of import growth and a lifeline. government spending, grew by a modest 1.55
Workers’ remittances grew by 20.9 percent in percent in nominal terms, while capital
FY13 on top of the remarkable 41.8 percent expenditures recorded a 2.7 percent increase. As a
increase in the previous year (in local currency result, public expenditure as a share of GDP
terms). As a result, officially recorded private declined marginally from 19.7 percent in FY12 to
transfers amounted to over 25.5 percent of GDP 19.4 percent in FY13. Actual spending was
in FY13 and 79.4 percent of the total merchandise significantly below budgeted amounts, reaching
import bill (over four times the oil import bill). 90.5 percent of plan for recurrent expenditures
Private transfer volumes are 13 times higher than and only 81 percent for capital expenditures,
official grant assistance received by the reflecting both some degree of fiscal
government. While contributing to Nepal’s responsibility (moderate recurrent spending) as
staggering import growth (via demand for well as Nepal’s chronic inability to upgrade its
imported consumer goods and food), private public infrastructure, despite having ample fiscal
space to do so.
Strong revenue growth shrank the overall
budget deficit (after grants) to its lowest level
in years. After grants, the budget balance ended
up in a deficit position equivalent to 1.1 percent
of GDP – against a deficit of 1.45 percent and 3.7
percent in the preceding fiscal years. Given
limited alternative spending opportunities, the
government chose to channel domestic borrowing
to draw down previous debt.
Real estate exposure has decreased to
historically low levels. Total exposure to real
estate declined y-o-y from 17.1 percent to 14.9
percent of the total loan portfolio between the last
quarters of FY12 and FY13 (as overall portfolio
outstripped real estate credit growth – Figure 14).
As a result, in FY13 only six commercial banks
(16 percent of the system) had exposure in real
estate in excess of 20 percent as opposed to 13
Financial Sector banks (33 percent of the system) in the previous
The financial year ended with a significant fiscal year. None of the banks today have real
easing of liquidity pressure, rising profits, estate exposure in excess of 25 percent.
declining non-performing loans (NPLs), and an
improved capital position. However, only once Poverty Trends
the results of ongoing stress tests and in-depth The “Nepal paradox” lives on, with impressive
diagnostics of financial sector institutions are progress on poverty reduction and human
known will it be possible to confirm that risks development despite modest economic
from real estate and other credit exposure and performance. Nepal has been reducing poverty at
vulnerability to potential loss of depositor an impressive rate of 2.5 percentage points per
confidence have been substantially lowered. year since 2004; it has already reached the first
After increasing sharply at the end of FY12 MDG of halving extreme poverty and could
and in the first three quarters of FY13, effectively eradicate poverty within the next
liquidity pressures eased. The overall credit-to- decade at the current pace. It has also made
deposit ratio of commercial banks (local substantial progress in reaching key MDG
currency) reached a peak of 83.4 percent in Q3 milestones and human development outcomes. At
before declining back to 79.2 percent (as deposits the same time, not all regions and ethnic groups
grew sharply in the last quarter in synch with have benefitted equally. While measures of
public spending). This is still significantly above consumption and access to services have
76.2 percent in Q4 of FY12 as credit grew faster improved across the country, progress has been
than deposits (21.7 percent vs.17.7 percent). slower for historically underprivileged regions
Overall risk declined as only three commercial and ethnic groups. Moreover, urban areas have
banks (9 percent market share) recorded CDRs in witnessed a drop in average real per capita
excess of 90 percent, compared to seven (17 consumption relative to five years ago, potentially
percent of market share) the previous fiscal year. signaling the failure of urban areas to act as
engines of growth.
Nepal has met the MDG target of halving the Most of the poverty reduction has occurred in
proportion of people living on less than rural areas. Despite increasing urbanization, four
US$1.25 per day. The number of poor has out of five Nepalis still live in rural areas, where
declined substantially since the mid-1990s. In 92 percent of the poverty reduction that occurred
1996, 68 percent of the population lived under between 2004 and 2011 took place. The rest came
US$1.25 (on purchasing power parity) per day; by from a population shift from rural to urban
2011 this had fallen to 24.5 percent. The pace of locations, with a coincident lowering of poverty.
poverty reduction accelerated sharply in the last
The main contributors to the reduction have
decade—from 1.5 percentage point per year
been farm and off-farm incomes in rural areas.
during 1996-2004 to 2.5 percentage points during
Between 2004 and 2011, the bottom 40 percent of
2004-2011. This amounts to a 40 percent higher
the population made 80 percent of its income
rate of poverty reduction than that achieved by
gains from just three sources: farm incomes (34
another remarkable performer, Bangladesh (1.8
percent), non-farm wage incomes (26 percent)
percentage point reduction per year during 2005-
and remittance receipts (20 percent).
10). Nepal progressed from being the poorest
Consequently, rising agricultural incomes, which
nation in South Asia in 1990 to the third-poorest
increased by around 3 percent per capita per year,
today, having overtaken both India and
played a major part in driving poverty reduction.
Bangladesh. Should poverty reduction be
maintained at this pace, poverty may be entirely Remittances, which accelerated in the post-
eradicated within the next decade. conflict period, also played a key role. Nepal is
the world’s largest recipient of foreign remittance
in proportion to GDP among countries with
populations larger than 10 million. The proportion
of households receiving remittances (internal or
external) rose from 23 percent in FY96 to 32
percent in FY04 and jumped to 56 percent in
FY11. Among recipients, the share of remittances
in total household income amounted to close to
one-third. Model-based, counter-factual analysis
at the household level shows that without
migration, poverty incidence would jump by 16
percentage points (from 19.3 percent to 35.3
percent) for households with internal migrants
and by one- quarter (to 32 percent) for those
households with migrants abroad.
Nepal’s modest growth has been pro-poor, Remittance inflows have helped, indirectly, to
although the bulk of poverty reduction was grow the rural economy. Counterfactual analysis
due to a reduction in inequality. Both growth only measures the direct net contribution of
and reduced inequality contributed to the large remitted cash to household consumption. But
observed decline in poverty between 2004 and remittances also support the expansion of non-
2011. With regard to the contribution of growth, agricultural incomes of the poor through spillover
the results of growth- inequality decompositions effects on the local economy. Nearly 18 percent
show that if every person in Nepal had of Nepal’s poverty reduction came from people
enjoyed the same growth in consumption as the moving out of self-employment or wage jobs in
average for the whole economy, poverty agriculture to taking unskilled wage jobs in non-
reduction would have been limited to just 8 agriculture or finding self-employment in the
percentage points instead of 18 percentage points. trade sector.
Indeed, the additional 10 percentage points can be
attributed to a reduction in inequality. There have also been major improvements in
several non-consumption-based indicators of
welfare. Most of the multidimensional indicators
of poverty have improved sharply. Particular gender parity index for net enrollment rate is
progress was achieved on: “children out of almost 1 at primary, basic and secondary levels.
school”, “time to primary school”, “safe And for these girls, the completion rate is higher
deliveries”, “access to electricity” and “access to than for their male classmates (84.5 compared to
telephones”. Moreover, the proportion of poor 83.9).
experiencing multiple or simultaneous
The results of the census conducted in June
deprivations declined from 46 percent in 1996 to
2011 revealed a young, rural and (better)
6 percent in 2011.
educated country. According to the census,
Inequality has remained low and stable over Nepal’s population stands at 26.5 million,
the long term. Consumption inequality in 2011 significantly below estimates and extrapolations
was estimated at 30 percent (Gini), slightly below that had placed it at above 30 million. This
its 1996 level. Every expenditure class enjoyed a discrepancy is explained by a significant decline
rise in per- capita consumption, with the poorer in population growth – from an average of 2.25
experiencing the greater increase, slightly percent per year in the decade 1991-2001 to 1.35
lowering the country’s overall inequality. Income percent per year over 2001-2011,– with a large
inequality is higher, at 48 percent (Gini). Both decline in the fertility rate. Today more than half
consumption and income inequalities vary of the total population is under 25 years of age.
similarly across geographic regions. Nepal’s population remains overwhelmingly rural
with the rate of urbanization rising only slowly to
Health 17.7 percent3 today. However, it is better
Nepal has made rapid progress in reducing educated with overall literacy registering an
child (under 5) mortality, with the rate falling increase of more than 10 percentage points in the
from 141 (per 1000 live births) in 1990 to 54 in past decade to reach 66 percent.
2011. While it may not reach the MDG target by
2015, it also recorded substantial gains in
maternal and reproductive health. Maternal
mortality (per 100,000 live births) declined
significantly from 850 in 1990 to 170 in 2013
(close to the government target of 134,
corresponding to a two-thirds reduction). The
share of births attended by skilled health staff has
risen from a mere 7 percent in 1990 to 50 percent
coverage in 2013. Almost 85 percent of women
who delivered in the last five years had attended
one or more antenatal care visits, while only 15.4
percent attended one or more visit(s) in 1990.
Nepal’s labor force expanded rapidly in recent
However, Nepal is off-track on the years, but it remains informal and modestly
nutrition MDG target: Malnutrition and productive. Between 2001 and 2011, Nepal’s
under-nutrition remain widespread, with close to total economically active population (aged15-59
41 percent ( 2011) of children under five years years) grew by 32 percent, from 12.6 million to
characterized as stunted (a modest reduction from 16.6 million. Employment remains highly
60 percent in 1990). informal and the small formal sector (5.8 percent
Education and Jobs of the employed) is overwhelmingly male (98.5
percent). While recent significant gains in human
Nepal has achieved substantial progress in development—particularly in education—may
access to education. Primary school enrollment pay-off only in the medium term, labor
is close to universal and primary completion is at productivity has grown by a modest 0.56 percent
a high 77.9 percent. Moreover, girls have annually, on average, between 1999 and 2008.
increasingly gained access to schooling: the
THE WORLD BANK IN NEPAL Lending performance exceeds the
memorandum of understanding for FY13. A
A Country Partnership Strategy (CPS) for total of US$415.3 million in new commitments
fiscal years 2014-17 is under preparation. The across seven projects has been approved in FY13,
last Country Assistance Strategy (CAS) covered which is the highest recorded commitment for
FY04-07, and was followed by several Interim Nepal in one fiscal year. Out of these four are
Strategy Notes (in 2007, 2009, and 2011), due to additional financing projects, two are new projects
the transitional nature of Nepal’s political and one is a Development Policy Credit. Several
situation. Moving to a CPS is considered strategic pieces of analytical support have been
appropriate, given positive development results completed or are nearing completion, including a
despite the conflict and political transition and the poverty assessment including mapping, a human
need for longer-term strategic support. The new development report, thematic reports on food
CPS will focus on two pillars—(i) increasing security and nutrition, and an Operational Risk
economic growth and competitiveness; and (ii) Assessment for Public Finance Management.
promoting human resilience while addressing
While these are positive developments, project
vulnerability—while also seeking, in a
implementation remains a serious challenge.
crosscutting manner, to enhance governance,
The Nepal portfolio faces chronic issues of
accountability and citizens’ empowerment. There
frequent staff turnover, weak fiduciary capacity,
will also be some ten specific outcomes for Bank
and delays on account of safeguards issues for
Group contribution. Given Nepal’s fluid political
infrastructure projects. While two problem
situation, the CPS has been developed through
projects were upgraded during FY13, at start of
extensive consultations with key stakeholders,
FY14, three other projects became problem
including political parties, who are remarkably
projects. Diligent portfolio monitoring driven by
aligned around Nepal’s development priorities.
the Country Office has led to improvements in
The current International Development performance. A Portfolio Action Plan, agreed with
Association (IDA) portfolio comprises of 19 the Ministry of Finance, is being monitored
active projects with a net commitment of about through monthly meetings to resolve issues such
US$1.53 billion. Cumulative disbursements as of as staff turnover and weak financial management
August 31, 2013, were US$805 million (about capacity. Going forward, we will continue to
52.6 percent of net commitments). In maintain a focus on implementation, especially
addition, there are three regional projects with net with rising commitment levels. The first Portfolio
commitments of US$240 million of which about Monitoring Meeting for FY14 with the Ministry of
US$11.5 million (about 4.8 percent of net Finance and other key line ministries was held in
commitments) have been disbursed. Of the three July.
projects, a third regional project, Nepal India
IDA 16 Program and Pipeline
Regional Trade and Transport project (US$99
million), was approved at end-June 2013. The Under IDA16, Nepal’s indicative allocation is
portfolio also includes three active trust fund about US$634 million (with a grant/credit
projects with commitments above US$5 million share of 45 to 55 percent). In FY12, only
each. The total commitment of these three about 70 percent of the FY12 IDA allocation
projects is US$87.5 million. was used, but the FY13 program made up for
this shortcoming and delivered 110 percent of the
Total disbursements have significantly
FY13 IDA resources. For FY14, IDA expects to
improved and nearly tripled from US$59
be able to deliver on the rest of the IDA16
million at end- March 2013 to about US$180
allocations within the first two quarters.
million at the end of FY13. The disbursement
ratio improved from 9 percent to 26.2 percent
during the same period, putting Nepal well above
South Asia region averages and also exceeding
the projected annual disbursement ratio of 23
percent. Despite its fragile country context, Nepal
has maintained a relatively stable track record in
disbursements, better than similar IDA countries.
INTERNATIONAL FINANCE committed exposure in investments was
US$49 million as of mid-June 2013. A
CORPORATION significant expansion of the investment
program is anticipated (FY14 Investment
Nepal, a fragile and conflict affected state, is Services program targeted at US$90 million
a priority country for the International over six projects, versus a FY13 Investment
Finance Corp. (IFC). Since 2008, IFC has Services program of US$20 million and six
been working closely with Nepal’s private projects).
sector through investments and advisory
services. To boost private sector growth, IFC
Active advisory programs focus on (i)
works to promote private investment in
improving the investment climate through
infrastructure, tourism, financial markets,
regulatory reform, public-private dialogue and
transportation, and trade finance. In recent
unlocking investments in key sectors, (ii)
years, IFC has also begun assisting the
sustainable business advisory focusing mainly
Government of Nepal improve the
on agribusiness and SMEs by engaging
investment climate; improve access to
directly with the private sector firms in sector
finance; and support the growth of
value chains, as well as SME ventures and (iii)
sustainable agriculture. IFC’s current
access to finance. IFC supported improvements
committed loan portfolio is US$49 million
in government-to-business services, business
and the total fund for IFC Advisory Services
regulations, and investment policies, such as
is US$10.7 million. IFC has 13 projects
cutting the time and cost of business
underway (eight on financial markets, one on
registration and easing licensing processes.
manufacturing and four on infrastructure) in
Nepal.
IFC is supporting aviation, agri-business
and tourism sectors through advisory
In line with the World Bank Group (WBG) support and actual investments in both
CAS, IFC promotes sustainable private equity and debt. IFC has been supporting
sector development through its advisory and private sector firms and reach farmers through
investment operations. Shortage of electricity their supply chains to help them increase
is a key growth constraint. Through investment revenues and expand access to growth markets
and technical advice, IFC has been helping by strengthening their business and financial
unlock barriers for new infrastructure projects, acumen and modern methodologies to enable
particularly in hydropower, to help meet them to adapt to climate change impacts. IFC
Nepal’s growing needs. Nepal energy has been invests in commercial banks and venture funds
identified as a key area for support for the that provide loans to micro, small, and medium
WBG .IFC and the International Bank for enterprises, which employ an estimated 1.75
Reconstruction and Development (IBRD) are million people and account for a fifth of the
jointly working to deliver transformative country’s GDP. This is aimed to facilitate
hydropower projects in the short, medium and growth of small and medium enterprises in
long term through a joint business plan that Nepal, helping enhance their financing options
focuses on a medium and large sized projects through a supportive financial infrastructure,
as well as cross border transmission lines. The including institutions, financial product
major existing projects in investment are in development, and improved payment
aviation, energy financial markets and small regulations. Financial institutions are also
and medium enterprise (SME) ventures. provided advice on how to diversify their
Pipeline investments include agribusiness, products for low-income households.
energy, and financial markets. The total
NEPAL: AGRICULTURE AND FOOD SECURITY PROJECT
Introduction. On June 7 2011, the Government of Nepal received a competitive grant of US$46.5 million
from the Global Agriculture and Food Security Program (GAFSP) to implement the Agriculture and Food
Security Project (AFSP). The GAFSP was established in April 2010 at the request of the Group of 20
(G20) to help countries make lasting improvements through sustainable investment in agriculture and food
security. Seven countries and the Bill and Melinda Gates Foundation have pledged about U S $1.1 billion over
3 years, with US as the largest donor. The World Bank is the administrator for GAFSP as well as the
supervising entity for AFSP. The AFSP is a multi-sector project executed by the Ministry of Agriculture
Development to tackle food and nutrition security. It is the first project in Nepal that brings together two
ministries – Agriculture and Health – to increase agricultural productivity and improve access to and
utilization of nutritious food. The project targets 19 hill and mountain districts of Mid-western and Far-
western regions of Nepal where the prevalence of low birth weight babies is reported at 14 per cent. Forty-six
per cent of the children under five are stunted and 32.6 per cent underweight. While the overall poverty rate
for Nepal is 25 per cent, it increases to 45 per cent in the project area.
Project Development Objectives: The goal is to enhance food and nutritional security of targeted
communities in selected locations of Nepal. Key expected outcomes of the project are: i) increased
productivity of targeted crops and livestock products, and ii) access to and utilization of nutritious food to
nutritionally vulnerable groups (pregnant and nursing mothers and children between 6 to 24 months age).
Project description: The project comprises three components: Technology development and adaptation;
Technology dissemination and adoption; and Food and nutritional status enhancement. The project aims to
reach 162,500 beneficiaries, including 45,000 pregnant and nursing women.
Results Achieved: The project just began implementation and as yet it is too early to see results. However, since
the project became effective on April 30 2013, a m emorandum of u nderstanding has been signed between
the Ministry of Agriculture Development and the main implementing partners – Ministry of Health and
Population and Nepal Agriculture Research Council. The project is receiving support from the World Bank’s
Development Impact Evaluation Initiative to design and implement an impact evaluation to measure impact of
project interventions.
Key partners: Food and Agriculture Organization (FAO) of the United Nations.
NEPAL: BUILDING RESILIENCE TO CLIMATE-RELATED HAZARDS PROJECT
Introduction: Nepal is prone to a range of hydro-meteorological (hydromet) hazards such as floods and
droughts, the frequency and intensity of which are expected to increase with climate change. The poorer
sections of the country – namely women and rural populations – are typically the worst-affected and have
the least capacity to deal with such risks. A well-functioning hydromet network, forecasting and early
warning system is crucial for strengthening resilience to such risks. The existing network is mainly
manual, with limited real time data collection, transmission and storage, and there is no system for issuing
authoritative warnings for weather-related disasters to government authorities, key user groups, or
communities at risk. Improved agro- meteorological information is also an urgent priority for the
agricultural sector. The Building Resilience to Climate-Related Hazards Project is one of five projects
financed through the Nepal Pilot Program for Climate Resilience under the Strategic Climate Fund.
Project Development Objectives: The project’s main objective is to enhance government capacity to
mitigate climate-related hazards by improving the accuracy and timeliness of weather and flood forecasts
and warnings for climate-vulnerable communities and to support development of agricultural management
information system services to help farmers mitigate climate related production risks.
Project description: The project has four components. The Department of Hydrology and Meteorology
under the Ministry of Science, Technology and Environment will implement three components, namely, (i)
institutional capacity strengthening within the Department, (ii) modernization of hydro- meteorological
observation networks and forecasting, and (iii) enhancement of Department’s service delivery system. The
Ministry of Agricultural Development will implement the fourth component, namely, (iv) creation of an
agriculture management information system.
Results Achieved: By establishing multi-hazard information and early- warning systems, upgrading and
modernizing the hydromet observation network, and strengthening the capacity of responsible institutions,
the accuracy and timeliness of weather forecasts will be increased. Reliable operation of an authoritative
public weather service providing meteorological and hydrological warnings and forecasts, including for
extreme and high impact events, will be developed. A sustainable agriculture management information
system will be developed and piloted in 25 districts and an end-to-end early warning system for water
related hazards will be piloted in two river basins with a potential for future scaling up.
Key partners: IFC, Asian Development Bank, ICIMOD and WMO.
NEPAL: I RRIGATION AND WATER RESOURCES MANAGEMENT PROJECT
Introduction: Two-thirds of Nepal’s population is engaged in the agriculture sector, which contributes 36
percent toward the nation’s total GDP. In view of its potential to alleviate poverty and promote economic
growth, the government has accorded the agriculture sector a top priority, second only to hydroelectric
power generation. With only about 28 percent of the total agricultural land under year-round irrigation,
there is a scope for both expanding the area under irrigation and improving water delivery and
management efficiency. The recently completed Agriculture Development Strategy, funded under a multi-
donor initiative (including the Bank), also attests to the importance given to irrigated agriculture.
Project Development Objectives: The Irrigation and Water Resources Management Project aims to
improve agriculture productivity and the management of selected irrigation schemes as well as to enhance
institutional capacity for integrated water resources management. The primary beneficiaries are water users
of 134 farmer-managed irrigation systems covering about 20,000 ha, mainly in the hill regions. The
project also targets the irrigation management transfer in four agency-managed irrigation systems and
essential structural improvements covering about 23,000 ha. Through the agriculture component of the
project, the project aims to ensure efficient integration of water resources and crop production to derive full
benefits from investments in irrigation.
Project description: The project has four main components: (i) irrigation infrastructure development and
improvement; (ii) irrigation management transfer to water user associations in the Terai (the southern plain);
(iii) institutional and policy support for integrated water resources management; and (iv) integrated crop
and water management.
Results Achieved: Out of 134 schemes, 74 have been completed, and the rest are near completion.
Infrastructure work and institutional strengthening activities are also progressing well. Water user
association strengthening is in progress. Agricultural yields have seen an average increase of 25-30
percent in project areas. Activities planned under the regular integrated crop and water management
program are also progressing well.
Current project status: The government has requested an additional financing of US$50 million to
rehabilitate and modernize an additional 80 schemes, strengthen water user assocuations, update the Water
Resource Information System at the central level, and consolidate the gains made in agriculture. The Bank
recently restructured the project and provided a one-year extension (to June 2014) suggesting the task team to
conduct an independent assessment of the project. This has recently been concluded through an independent
assessment team from the Food and Agriculture Organization (FAO). Based on the recommendations of the
assessment team, the IDA team will start preparing for additional financing with delivery planned for this
fiscal year.
NEPAL: PROJECT FOR AGRICULTURE COMMERCIALIZATION AND TRADE
Introduction: Nepal’s mountainous landscape and infrastructure gaps have weakened linkages in the food
value chain, exacerbating the challenges in agricultural growth and food security. Its entry into the World
Trade Organization (WTO) presents new opportunities for market integration provided the competitiveness
of the agriculture sector could be significantly enhanced. It is strengthening emerging commodity value
chains, and providing local and international access to markets by forging backward and forward linkages in
selected value chains.
Project Development Objectives: The project aims to improve the competitiveness of project-supported
smallholder farmers and agribusinesses within selected commodity value chains by (i) helping farmers to
engage in profitable market- oriented production; (ii) creating and strengthening industry-wide partnerships
among producers, traders, processors, and other stakeholders; and (iii) strengthening the national system of
sanitary and phytosanitary and food quality management.
Project description: Component (ii) includes the provision of matching grants to commodity value chain
actors mainly for technology support and agribusiness development. The project also supports the
identification of commercially-viable value chains and preparation of commodity specific value chain
development plans for the promotion of high value commodities. Component (iii) aims to increase the ability
of farmers and agribusinesses to respond to sanitary, phytosanitary and food-quality standards to meet
domestic and international market requirements.
Results Achieved: To date, 126 cooperatives, 66 farmers groups, 55 private firms and 8 producers
associations have benefitted. Almost 40 percent of the existing 40,000 beneficiaries are women and
members of marginalized communities. There has been significant increase in volume, sales and productivity
of the selected commodities value chains. Procurement of laboratory equipment for the Departments of Food
Technology and Quality Control, Livestock Services, Agriculture, with associated food analysis training
programs, has improved these departments’ monitoring and quality control capacities.
Current project status: Overall performance is stable. Disbursements are low as the project follows a
results-based approach with grant payments triggered once agreed milestones are achieved under the sub-
projects. For disbursements to accelerate, the sub-projects need to accomplish certain milestones, which may
require a longer time.
Key partners: None
NEPAL: MODERNIZATION OF RANI JAMARA KULARIYA IRRIGATION SCHEME
Introduction: The Rani Jamara Kulariya Scheme (the Rani Scheme) is one of the most prominent Farmer
Managed Irrigation Schemes in Nepal, with a cultivable command area of 14,300 ha (the project area), of
which about 11,000 ha is currently being irrigated. It is located in the Terai area of Kailali District in the
Far Western Development Region, one of the least developed regions in the country. The scheme,
developed by the farmers (mostly from the indigenous Tharu community) from 1896 onwards, constitutes
three independent traditional irrigation systems constructed, operated, and managed by the farmers. Each of
the systems draws water from the Karnali River (a tributary of the Ganga River) and has an extensive
canal infrastructure, with three branch and 41 sub-branch canals that have a total length of about 230 km.
Project Development Objectives: The project aims to improve irrigation water delivery to, and
management in, the Rani Jamara Kulariya irrigation scheme, through improving the performance of the
irrigation systems and strengthening community-based irrigation management.
Project description: Bank support for the Rani Scheme is proposed in two phases. The ongoing phase
one focuses on modernization of the higher-order irrigation infrastructure (especially intakes and feeder and
branch canals), enhancing the capacity of the water user associations to operate and maintain the improved
or new irrigation infrastructure, and the preparation and initiation of an agricultural development program.
Phase 2 will mainly focus on the modernization of the lower-order irrigation infrastructure (sub-branch and
tertiary canals and water courses), continuation of the water user association support program, and
implementation of a comprehensive agricultural improvement program.
Results Achieved: It is too early to describe the results of the project interventions as none of the works
has been fully completed. The project results will eventually be measured against such indicators as (i)
irrigation service delivery by service providers (water user associations) assessed as satisfactory by water
users (measured in percentage of water users); (ii) resources generated by water users for the operation and
maintenance of the modernized irrigation systems (measured in percentage of required resources); (iii)
increase in irrigated crop yields of main crops rice, wheat, and maize (in about 40 percent of the
command area at the head of the canal systems; measured in tons/ha); and (iv) number of female and
male water users (defined as member of the water user association) provided with improved water delivery
services.
Current project status: Except for a few packages, all major procurement has been completed.
Implementation of a number of contracts is progressing well, especially on Command Area Protection
work (see photo). All civil works contracts will be in place by the start of the next construction season
in December 2013, so good progress is expected during FY14.
Key partners: None.
NEPAL: ZOONOSIS CONTROL PROJECT
Introduction: Like other countries in Asia, Nepal risks the spread of infectious disease, like avian influenza,
that transmits from animals to humans. Ensuring that this risk is mitigated will help to protect and increase
livestock productivity and strengthen the livelihoods base for food-insecure communities.
Project Development Objectives: The Zoonosis Control Project aims to enhance Nepal’s capacity for
the prevention and control of infectious diseases that transmit between animals and humans (zoonoses),
under a One Health approach.
Project description: Building on the avian influenza prevention and control mechanisms developed under
the IDA-financed Avian Flu Control Project (AICP), this project aims to expand the scope to key zoonotic
diseases under a One Health approach, with particular emphasis placed on the country capacity for overall
coordination, preparedness, and prevention by strengthening the capacities of the Department of Livestock
Services and the Department of Health Services. The project will also develop early warning mechanisms to
mitigate livestock disease risks induced by climate change. The project includes four components: (i) animal
health, (ii) climate sensitive disease risk mitigation, (iii) human health, and (iv) communication. The direct
beneficiaries of the project are the farmers and rural population whose livestock is affected by zoonotic
diseases and who depend on livestock for their livelihoods, food security and nutrition.
Results Achieved: In its first year, the project has been able to show tangible results, particularly in the area
of disease surveillance, preparedness and ability to contain highly pathogenic diseases. Since the termination
of AICP in July 2011 there have been an additional 60 outbreaks of avian influenza; the project has been
successful in controlling and containing these outbreaks, without any report of human fatality.
Current project status: The government-wide delay in the release of the budget for FY2012/13 (due mainly
to a political impasse) slowed down project implementation. Even so, over the last year, the project team
completed preparatory work that helped in expediting implementation. Except for one or two packages all
major procurements are in progress. Implementation of a number of contracts are progressing well,
especially the renovation of quarantine facilities and upgrading of laboratories. In order to respond to the
government’s request to allow claims for compensation due to recent outbreak, the project is being
restructured to accommodate this request.
Key partners: None.
NEPAL: KABELI TRANSMISSION PROJECT
Introduction: Nepal has rich hydropower resources that could potentially support export of hydropower to
other countries in the region. However, it is facing energy crisis of unprecedented severity (up to 18 hours/day
load shedding in dry seasons) due to generation shortages and transmission bottlenecks. IDA funding will help
development of the transmission facility to evacuate the hydropower potential in the Kabeli River corridor,
where about a dozen private power generation projects are in various stages of development. One of them is
the Kabeli A Hydropower Plant, 37.6 megawatts (MW), which is under preparation for IDA/IFC financing,
with a Board date in FY14.
Project Development Objectives: The project aims to support the addition of transmission capacity to
the Integrated Nepal Power System, and to provide access to electricity and cooking fuel to communities in
the area of the Kabeli 132 kilovolt (kV) transmission line.
Project Description: The project has three components: (i) construction of a new 132 kV transmission line in
eastern Nepal, with associated substations; (ii) construction of low-voltage distribution lines and associated
infrastructure to provide access to electricity; and (iii) provision of on-grid electricity to communities in the
area of the transmission line, as well as provision of off-grid electricity and cooking fuel through to selected
communities for which grid extension under the second component is not a feasible option. The first and
second components are under implementation by the Nepal Electricity Authority, while the third is being
implemented under the Alternative Energy Promotion Center.
Results Achieved: Thirty-five solar home systems, three institutional solar systems and 25 bio-gas plants
have been provided under the third component. No results in others components as the project components are
under implementation.
Current project status: The main contract for supply and construction of the transmission line became
effective in October 2011. Due to initial mobilization delays, the line survey was not completed until March
2013. The final alignment avoids dense forest areas as far as possible. Upon completion of the line survey, the
base line information in the Initial Environment Examination and Social Impact Assessment reports needs to
be updated; the existing Environmental Mitigation Implementation Plan and Resettlement Action Plan also
needs to be updated to reflect actual site conditions. Yet to be prepared is the livelihood training plan, as a
part of the rehabilitation program for project affected communities. The Nepal Electricity Authority is
hiring a safeguards adviser for regular and periodic third-party review of safeguard activities, and
construction supervisors to assist the authority with transmission-line construction activities. The land for
sub-stations has been acquired and civil works started. The progress of electrification program for the
affected communities has been slow.
Key partners: None
NEPAL: POWER DEVELOPMENT PROJECT
Introduction: Nepal is facing an energy crisis of unprecedented severity (up to 18 hours/day load shedding
in dry seasons) due to generation shortages and transmission bottlenecks. Its power system is also
characterized by high system losses (26 percent) and low levels of access in rural areas.
Project Development Objectives: The project aims to build capacity to manage the development of Nepal’s
hydropower potential in a prudent and sustainable manner; increase access to electricity services in rural areas;
and improve the supply and accountability of electricity.
Project Description: The project as originally approved had three components: (i) establishment of a Power
Development Fund, implemented by the Department of Electricity Development; (ii) a Micro Hydro Village
Electrification Program, implemented by the Alternative Energy Promotion Centre; and (iii) support of the
Nepal Electricity Authority (NEA). The project was first restructured in 2008 to cancel the Project
Development Fund component, which aimed to finance the development of private sector small hydropower
projects but was not successful; hence funds were reallocated to the other two components. Additional financing
of US$91.7 million was approved in May 2009 to address a power crisis by rehabilitating generation capacity,
strengthening the transmission system and expanding distribution. As part of a second restructuring in
December 2012, the closing date was extended to Dec 2013 and US$42.5 million of IDA funding was
cancelled. An Implementation Action Plan was agreed for completion of the remaining scope of work by
December 31, 2013. Some of cancelled transmission lines are critical to power sector development in Nepal,
and so on government request, the Board in June 2013 approved additional financing for the ongoing Nepal-
India Electricity Transmission and Trade Project to continue the support to these transmission lines.
Results Achieved: Access provided to 74,000 rural households through off-grid microhydro schemes and
45,000 through grid. Loss reduction of 1.6 percent in nine distribution centers and 6 percent in
Kathmandu Valley.
Current project status: Construction of transmission line and substations is on track. That said, procurement
valued at about US$5.9 million has not been completed for (i) supply of goods and materials for the Ramechhap
Rural Electrification Project; and for (ii) the last lot for material supply remaining under the Kathmandu Valley
Distribution System Reinforcement project. These two activities will not be completed and associated funding
will be cancelled. The Bank received on February 18, 2013, a complaint from local residents regarding
construction of eight towers on the Khimti-Dhalkebar transmission line, affecting 122 households. The
Electricity Authority stopped associated construction work for more than 1.5 years, and is addressing the
complaint with revised compensation package and consultation and communication actions, in close
coordination with the Bank. On July 10, 2013, the Accountability Counsel, a US-based NGO, filed a complaint
related to the Bank’s Inspection Panel.
Key partners: UN Development Program
NEPAL: KALI GANDAKI A HYDROPOWER PLANT REHABILITATION PROJECT
Introduction: Kali Gandaki A is a 144 MW run-of-river plant. It is the largest single hydroelectric facility
in Nepal, supplying about 25 percent of total generation as well as six hours per day of peaking capacity. It
is located on the Kali Gandaki River in Syangja district, below the confluence of Kali Gandaki and Andhi
Khola rivers. The Asian Development Bank (ADB) funded the original plant, which cost US$453 million
and was commissioned in 2002. After 10 years in operation, the plant’s available generation capacity has
sharply deteriorated, due to sedimentation, erosion and cavitation of the power turbines (from silt and
floating debris). There are safety management improvement issues, as well as a need to finalize the
Operations Manual for the head works, including the dam.
Project Development Objectives: The project aims to improve the reliability of power supply from the
plant, through rehabilitation and safety measures, as well as to improve the government’s response capacity
in case of an energy crisis.
Project Description: The project has four components: (i) civil works (US$9.1 million); (ii) electro-
mechanical works (US$16.6 million); (iii) technical assistance and capacity-building (US$4.7 million); and
(iv) contingent emergency response (financing would be reallocated into this component if an emergency
response were required). The rehabilitation program aims to improve the safety management of the dam;
decrease the total quantity of sediment entering the powerhouse; reduce the cavitation in the turbine in the
dry season; and improve plant safety by improving the operation of the main inlet valves as well as by
repairing the control systems.
Results Achieved: The project was approved by the Board on May 15, 2013 and is yet to be declared
effective.
NEPAL: NEPAL-INDIA ELECTRICITY TRANSMISSION AND TRADE PROJECT
Introduction: Nepal has rich hydropower resources that could potentially support export of hydropower to
other countries in the region. However, it is facing energy crisis of unprecedented severity (up to 18
hours/day load shedding in dry seasons) due to generation shortages and transmission bottlenecks. While
the government is seeking both public and private investments in hydropower generation and transmission
facilities, this project complement the government strategy to address the electricity shortages through
import of electricity from India. It will also enable export surplus hydropower to India in the long term.
Project Development Objectives: The development objectives are to: (a) establish cross-border
transmission capacity between India and Nepal of about 1,000 MW to facilitate electricity trade between
the two countries; and, (b) increase the supply of electricity in Nepal by the sustainable import of at least
100 MW.
Project Description: The project has three components: (i) the design, construction and operation of
approximately 130 km of 400 kV double circuit north-south cross border transmission line between
Muzaffarpur in India and Dhalkebar in Nepal (DM; this line will be implemented by two companies in
Nepal and India without World Bank financing or oversight); (ii) the design, construction and operation of
approximately 285 km of 400 kV double circuit east-west transmission line for the Hetauda-Dhalkebar-
Duhabi (HDD) segment, together with concomitant substations in Nepal. The Dhalkebar substation will
receive electricity through the north-south transmission line under component (i) above; (iii) technical
advisory services (a) for the Owners’ Engineer for Nepal Electricity Authority for overseeing component (ii)
of the project, (b) for preparation of a transmission system master plan for future transmission system
development in Nepal, (c) for strengthening the institutional capacity of the Electricity Authority’s
transmission business, including to increase cross-border transmission links, and (d) for the Ministry of
Energy and the Nepal Electricity Authority to develop understanding of the concepts of benefit-sharing in
export-oriented hydroelectric projects.
Results Achieved: Given the nature of the project, results will accrue after the transmission line is
commissioned.
Current project status: A contract was awarded in February 2013 for supply and installation of towers for
HDD 400 kV transmission line and is now under implementation. The check survey for the right-of-way is
nearing completion, and consultation with and compensation to project-affected persons will follow before
construction begins. The Owner’s Engineer has been mobilized and is providing support to Electricity
Authority on design of the substations. Bidding documents for three substations are under review by the
Bank. Procuring of conductors for the transmission line is under tendering. Procurement for supply and
installation of the DM line (not financed by the Bank) is under progress with bids under evaluation. In June
2013, the Board approved US$39 million in additional financing to provide continued support to
implementing the critical transmission lines cancelled from the Power Development Project.
NEPAL: PUBLIC FINANCIAL MANAGEMENT Multi-Donor Trust Fund
Introduction: PFM is a key element of the government’s strategy for strengthening public service
delivery and ensuring inclusive and broad-based development form a central part of the public
financial management (PFM) process. The PFM agenda has also been a top priority for Nepal’s
development partners to promote efficient and effective public service delivery. As part of this effort, an
multi-donor trust fund to support PFM was established in December 2010.
Project Development Objectives: The project aims to strengthen the performance, transparency and
accountability in public financial management in Nepal.
Project description: The trust fund has four components: (i) strengthening PFM systems and capacities
(including by implementing a Single Treasury Account, raising public sector accounting standards, and
strengthening the Public Expenditure and Financial Accountability Secretariat); (ii) enhancing
accountability in PFM (by strengthening the Office of the Auditor General and strengthening the use of
social accountability); (iii) deepening knowledge related to PFM (by undertaking analytical work for
knowledge dissemination; ongoing analytical works include a Public Expenditure Tracking Survey in the
education sector and an Operational Risk Assessment); and (iv) program management and administration.
Results Achieved: The key results expected are: (1) improved resource management as a result of
strengthened PFM systems and processes; (2) increased awareness and oversight of government PFM
processes; and (3) better knowledge of value for money challenges and PFM governance gaps,
contributing to improved design of PFM interventions at the country and sector levels.
Current project status: Under the first component, the Treasury Single Account (TSA) has been
successfully implemented in 75 districts, covering about 99 percent of the budget, and capturing around 99
percent of budgeted expenditures and 97 percent of the receipt transactions of the central government.
Key areas of concern are frequent staff turnover, delays in recruiting consultants for implementing public
sector accounting standards, and delays in starting-up the Public Expenditure and Financial Accountability
assessment. Under the second component, efforts to strengthen the Office of the Attorney General are
on track, moving it toward a risk-based approach, and building upon the benefits of a recent visit to the
UK’s National Audit Office. Under the third component, the project is extending grants to civil society
organizations to create awareness about PFM. In addition, an analysis of how audit recommendations are
implemented in Nepal was completed in 2012, and the education Public Expenditure Tracking Study is on
schedule and will be completed in 2013. An Operational Risk Assessment on PFM Reform concluded in
August 2013.
Current partners: Australia’s AusAID, The UK Department for International Development (DFID),
Denmark, Norway. (Potential partners include the EU, Sweden).
NEPAL: COMMUNITY ACTION FOR NUTRITION PROJECT (SUNAULA HAZAR DIN)
Introduction: Being part of the Scaling-Up Nutrition movement, the Government of Nepal has realized the
need to address malnutrition across multiple sectors, and has developed and endorsed a Multisectoral
Nutrition Plan for the country. The Plan envisages an equal role of nutrition-sensitive and nutrition- specific
interventions in realizing the nutrition goals during the first 1,000 days of a child’s life. Motivated by
this initiative, the Bank has extended support to the implementing agency through the Sunaula Hazar Din
project to address the community-wide risk factors that contribute to malnutrition.
Project Development Objectives: The project aims to inculcate attitudes and practices known to
improve the nutrition of women of reproductive age and children under the age of two, thereby creating
demand for nutrition-related services and products. These services and products will be provided through
existing public- and donor-funded programs, and, to a limited extent, through the project directly.
Project description: The Ministry of Federal Affairs and Local Development implements the project and
will roll-out a social mobilization initiative through a community-driven Rapid Results for Nutrition
Initiatives (RRNIs), where each ward in a selected Village Development Committee (VDC) will commit to
a series of pre-defined nutrition-relevant goals, each to be met within a 100-day period. The
achievement of the goals will be the responsibility of RRNI teams (one for each ward), supported by a
coach who will support all RRNI teams in one VDC. The RRNI approach will be rolled out in a sequenced
manner across the 15 project districts. An impact evaluation is built into the project design.
Results Achieved: The project is in its early stage of implementation, the delay being partly due to
program complexity and partly due as well to FY2012/13 government-wide delays in approving the budget
for all new programs. The RRNI approach was introduced in two VDCs last fiscal year and is in the mid-
period of the sub project cycle. The lessons learned from this pilot will be incorporated into a final operations
manual.
Current project status: Baseline survey instruments and the detailed impact evaluation design are being
finalized. As baseline data are not expected to be available until end-2013, targets will be reviewed after
the baseline survey results have been obtained. The process of hiring a firm for training and backstopping
coaches and social mobilizers has started, in parallel to the Ministry of Federal Affairs and Local
Development recruiting coaches through NGOs. The former activity will be financed by a Bank-executed
trust fund.
Key partners: None
NEPAL: POVERTY ALLEVIATION FUND PROJECT 2
Introduction: The Poverty Alleviation Fund was established about eight years ago, with the first project
operating in six pilot districts. To date, PAF has successfully reached out to vulnerable groups, especially
those who are disadvantaged due to gender, caste, ethnicity or physical isolation, in 40 districts (some special
programs have been conducted in additional districts). PAF has made agreements with 22,178 community
organizations for implementing various sub-projects, and these organizations have also started to build
federations, an organizational network, and co-operatives. Additional financing will increase coverage in
eligible Village Development Committees in the 40 districts that PAF has not yet covered, and expand to 15
additional districts. This expanded effort will also focus on delivering technical assistance for scaling-up
activities and providing market linkages to graduating community organizations and support to those that
have already engaged in wider organizational forms.
Project Development Objectives: The project aims to improve living conditions, livelihoods and
empowerment among the rural poor, with particular attention to groups that have traditionally been excluded
by reasons of gender, ethnicity, caste, and location.
Project Description: The project has four main components: (i) small-scale community infrastructure, to
provide capacity-building support and sub-grants to community organizations for local infrastructure
projects (e.g., micro irrigation, footbridges, drinking water, etc.); (ii) sustainable income generation, to
provide capacity-building support and sub-grants to community organizations for income-generation
activities; (iii) product development, market linkages and pilots, to support those community organizations
that are more advanced; and (iv) capacity-building and institutional strengthening, to support the formation
and development of community organizations and the creation of cooperatives and market alliances.
Results Achieved: Good results have been achieved in improving infrastructure, income-generating
activities and improved citizen participation in community decision-making. Monitoring results indicate
that 68 percent of households have obtained a minimum income increase of 15 percent (in real
terms). Improvements in key welfare outcomes (such as per capita consumption, incidence of food
insecurity, and school enrollment rate among 6-15 year-olds) were also clearly linked to PAF interventions
in an impact evaluation survey conducted in 2010. Overall, PAF has reached over 550,000 poor
households, and 74 percent of the direct beneficiaries are female.
Current project status: A second additional financing was approved June 5, 2013, and the Financing
Agreement was signed on July 8, 2013.
Key partners: The International Fund for Agricultural Development (IFAD) has provided US$4 million,
and is expected to provide an additional US$5 million as additional financing.
NEPAL: SECOND HNP AND HIV/AIDS PROJECT
Introduction: In 2004, donors moved to a Sector-Wide Approach (SWAp) in the health sector to
reduce transaction costs to the Government of Nepal. IDA, DFID and AusAID are currently pooling funds.
The SWAp aims to address key challenges, including: (i) access, social inclusion and equality in health
service utilization; (ii) making better progress on the MDG targets for nutrition and HIV/AIDS, which are
not on track; (iii) sector governance and accountability; (iv) coordination across ministries concerned with
water, sanitation and hygiene, nutrition and road safety (which all impact health status); and (v)
maintaining gains in reducing maternal mortality and increasing Vitamin A and immunization coverage.
Project Development Objectives: The project aims to enable the government to increase access to
essential health care services and their utilization by the poor and the underserved, specifically by raising
the percentage of pregnant women receiving iron and folic acid to 87 percent, children being fully
immunized to 90 percent, and skilled attendance at birth to 35 percent by the end of the project.
Project description: The project, through the SWAp format, supports the Nepal Health Sector Program
II, which aims to increase access to and utilization of quality essential health services, reduce cultural and
economic barriers to accessing health care services, and improve health system to achieve universal
health coverage, all in close partnership with non-state actors. The government has assumed a
responsibility to achieve these goals by extending and sustaining coverage of essential h ealth c are
s ervices including reproductive health, child health, communicable and non-communicable disease control,
curative care, oral health, eye care, environmental health and rehabilitation of disabled people. The program
ensures free health care to all who access services in public health facilities at district hospitals, primary
care centers, and health posts. It has two elements: health service delivery, and health systems strengthening.
Results Achieved: Nepal has made good progress on key results indicators. Two-out-of-three results
indicators already exceed targets: coverage of skilled birth attendance has reached 46 percent (against a
target of 35 percent) and iron folic acid coverage has increased to 91 percent (against a target of
87 percent). Immunization coverage has remained at 86 percent since the last reporting period. Progress
has also been made in exclusive breastfeeding and vitamin A supplementation for children under five.
Nutritional status of children under five has improved, with a decline in stunting from 49 percent in 2006
to 41 percent in 2011 and in underweight status from 39 percent to 29 percent. The joint planning and
review process is partly credited for cushioning the sector from the budget unpredictability that Nepal
went through in 2012-13. Joint Annual Reviews and Annual Work Plan and Budget discussions are
improving and have become more results-focused, and the quality of budget preparation has improved.
Current project status: There are areas where performance is lagging, requiring more attention in the
coming year (e.g. contraceptive prevalence rate, equity of access to quality services, vacant positions).
Further, procurement complaints are being filed, and an investigation by the Integrity Vice Presidency is
underway. A detailed fiduciary risk assessment has recently been concluded, indicting a high-risk
environment.
Key partners: In addition to IDA, DFID, AusAID, Germany’s KFW and GAVI SWAp partners supporting
the government program under pool financing arrangement.
NEPAL: BIOGAS PROGRAM
Introduction: Nepal’s energy profile is characterized by a heavy reliance on traditional biomass, which
contributes to 87 per cent of the total energy consumption. Decentralized renewable energy solutions for
cooking and lighting reduce dependence on traditional biomass energy, protect the environment by
reducing greenhouse gas emissions, and contribute to regional balance and sustainable economic
development.
Project Development Objectives: The project’s goals are to reduce global greenhouse gas emissions and
to increase access to modern household cooking fuel from renewable energy sources.
Project description: The project promotes household biogas digesters and biogas stoves to households
with one or two cattle through capacity enhancement of the private sector to carry out feasibility analysis,
installation and after sales services of the biogas plants. The digesters enable the households to substitute
firewood and fossil fuels with biogas from animal waste and human excreta. The project consists of four
bundles, which have all been registered successfully as a Clean Development Mechanism under the United
Nations Framework Convention on Climate Change (UNFCCC). The World Bank, as Trustee of the
Community Development Carbon Fund, signed an Emission Reduction Purchase Agreement on May 3,
2006, to purchase 1 million tCO2e from this project and later amended on November 30, 2012.
Results Achieved: Installed biogas plants implemented under the Project are fully operational and
expected to fulfill the commitment to deliver 1 million emission reductions by 2015. A total of 59,998
biogas plans have been installed as part of the project, and 95 percent are reported to be operational as per
sample surveys conducted by third parties. A total of 327,843 emission reductions have already been
delivered to the Community Development Carbon Fund after successful verification. Additional 284,531
emission reductions are currently under verification and are likely delivered in the first quarter of FY14.
Current project status: Nine monitoring reports have been prepared to date. Four verifications were
successfully concluded and accepted by the Clean Development Mechanism Executive Board for issuance
of total 278,506 tCO2e of Certified Emission Reductions. The remaining five monitoring reports are
currently being reviewed for issuance of total 329,168 tCO2e. These reports have been published through
the UNFCCC website, and are in the process of verification, followed by the submission of the request for
issuance. The Bank expects to pay for an additional 284,531 emission reductions generated from the
Project (2009 - 2012) during FY14. This will take disbursements to 61 percent.
Key partners: KfW, Netherlands, Nepal Biogas Promotion Association, Biogas Sector Partnership-
Nepal.
1
Central Bureau of Statistics, Government of Nepal, 2013.
NEPAL: ROAD SECTOR DEVELOPMENT PROJECT
Introduction: Nepal has the second lowest road network density in the region. Only two-fifths of the
population has access to paved roads within a 20-minute walking time. The substantial lack of accessibility to
economic centers and social services in the remote areas is seen as one of the main impediments to poverty
reduction and economic development. By 2016, the Government of Nepal aims that 86 percent of the
population liv e within two hours (plain districts) or four hours (hilly districts) walking distance to a paved
road. Connection of all district headquarters with all-weather roads has been one of the key elements of
the Road Sector Priority Investment Plan of 2007. The Road Sector Development Project has been
designed in this backdrop to support the Strategic Roads Network.
Project Development Objectives: The project seeks to provide all season road access to the residents of
beneficiary districts, reducing travel time and improving access to economic centers and social services.
Project description: The project targets to connect eight remote district headquarters in the Mid-Western
and Far-Western Regions of Nepal. The original project was approximately US$43 million with additional
financing of US$75 million a t end-2010. The components are: (i) Road Development (utilizing 83 percent
of the funding); and (ii) Institutional Strengthening and Policy Reform.
Results: Progress towards the achievement of project goals has been moderately satisfactory. Results of a
socioeconomic impact study report (October 2011) show that two results indicators have surpassed
targets for roads under the original project scope. A survey carried out in December 2011 showed that 11.3
percent of paved Strategic Road Network roads are now in poor condition; the target was to reduce this to
15 percent. A chievements viewed against two project indicators will be fully assessed through a final
socio-economic impact study (planned in 2014). Intermediate results indicators under the Road
Development Component are most likely to be achieved. All intermediate results indicators under the
Institutional Development Component are likely to be achieved except one: the road asset management tools
used for prioritization of road maintenance and upgrading works. The Bank team has been working with the
project team to update the road inventory and conditions of roads, which will provide the key inputs for the
implementation of road asset management tools.
Current project status: The Road Sector Development Project was one of the best performing projects
in the Nepal portfolio. It became a problem project as performance deteriorated substantially in recent
months after the untimely transfer of key project officials. Performance slowed in almost all areas including
implementation of road works, social and environmental safeguards, and financial management. The Bank
raised concerns with senior government officials and the situation has started to improve. Despite this
temporary setback, the project is expected to achieve its physical output targets. All major road works
contracts are now procured and are under implementation.
NEPAL: RURAL ACCESS IMPROVEMENT AND DECENTRALIZATION PROJECT
Introduction: Approximately 83 percent of Nepal’s population lives in rural areas. Nepal’s topography and
geology, combined with a rural population distribution, significantly complicate efforts to provide all
weather connectivity to many rural communities. Improving connectivity throughout Nepal is a key
consideration for ensuring that economic growth is inclusive. Access to markets, social services, and
assistance during emergency events directly depends on the quality of road transport infrastructure available
to rural communities. The project has been designed to enhance physical access for rural populations to
social and economic services and facilities. The project covers 30 districts (out of 75 districts in Nepal),
which are widely dispersed. Then original project outlay of the Bank support was approximately US$43
million. The project received additional financing (US$55 million) at the end of 2009.
Project Development Objectives: T he project aims to improve utilization of rural transport
infrastructure and services by residents of participating districts in order to provide enhanced access to
social services and economic opportunities.
Project description: the project has two components: (i) A Rural Transport Infrastructure Component (that
accounts for 84 percent of funds); and a (ii) Capacity Building and Advisory Services Component. The
project target is to upgrade approximately 1,200km of rural roads to all season standards with low-cost
surfacing. It is also developing approximately 150km of trails into dry-season roads. The project is
supporting the construction of trail bridges (in collaboration with other donors) and few drivable bridges.
The second component is supporting a range of activities that include the preparation of District
Transport Master Plans, development of e-bidding systems, development of asset management systems,
and the development of management information system modules.
Results: The project's progress towards achieving its goals is moderately satisfactory. The results of an
impact study (conducted on completed roads in 20 districts under original project scope) show that values
of main indicators have surpassed end-of-project targets. The final assessment of results indicators will be
made once the impact and socio-economic monitoring study of roads under the additional financing is
completed. The Rural Access Improvement and Decentralization Project has made a study plan and the
study will be completed before the project completion of date i n December 2013. The project is
expected to achieve all the output indicators except one: the upgrade of dry-season trails into dry-season
standard roads. This activity had been delayed due to the procurement problems faced during the
procurement of design consultants.
Current project status: The project is expected to achieve almost all of its output targets. Procurement of
all roadwork contracts is complete and road works are ongoing.
Key partners: While there are no partners under the project, DFID and the Swiss Agency for
Development and Cooperation are active in the rural roads sector.
NEPAL: BRIDGES IMPROVEMENT AND MAINTENANCE PROGRAM
Introduction: The existing bridge stock in Nepal is over 35-40 years old and in urgent need of
rehabilitation and maintenance. There are still many gaps in the Strategic Roads Network caused by lack
of bridges contributing to a substantial lack of physical access to economic centers and social services,
particularly in remote areas. Nepal’s topography and geology also complicates efforts to provide adequate
transport infrastructure. The lack of physical access is seen as one of the root causes of the conflict high
level of poverty incidence in remote areas. The Bridges Improvement and Maintenance Program has been
designed by the government to address these issues.
Project Development Objectives: The project aims to provide safe, reliable and cost effective bridges
on Nepal's Strategic Roads Network.
Project description: The project supports the government’s initiative under the Program for Results
lending instrument (the Bank’s first such advance through IDA, and the first infrastructure project to use
this instrument). The overall program outlay is outlay is US$150 million and the Bank’s share is roughly
40 percent. The scope of the project encompasses three primary activities: (i) planning, technical design and
quality control of bridges; (ii) major and minor maintenance of existing bridge assets; and (iii) new bridge
construction.
Results: The program plans to finance major maintenance of 330 bridges, minor maintenance of 95 bridges
and new construction of 121 bridges. It also plans to support the development and management of the
Bridges Maintenance System and the development and operation of a new approach to addressing
grievances. The Bridges Improvement and Maintenance Program has just started operations. Two of the
three results indicators will be assessed at the mid-term of the project. The other indicator is a disbursement-
linked indicator (DLI).
Current project status: The program had delayed start up due the non-fulfillment of certain
conditions, mainly due to last year’s political impasse and resulting delays in announcement of a full budget
by the government. The program encountered teething problems, such as delays in streamlining budget
allocation procedures and delays in the procurement of technical support consultants. That said, there are a
number of achievements. They include: the development of a five-year bridge-by-bridge plan program to
help guide the achievement of physical disbursement-linked indicators, continued progress on realizing
the Action Plan, full adaptation of the Bridges Maintenance System for the prioritization of Program
bridges, the revision, and approval of the Environmental and Social Management Framework that
included bridge related issues. An impact evaluation has been designed and funding secured.
Key partners: None. Recently DFID has expressed an interest to join the Program, and discussions are
underway.
NEPAL: SOCIAL SAFETY NET PROJECT
Introduction: Nepal frequently faces food crisis in some parts of the country largely on account of
weather conditions and natural disasters. The Social Safety Net Program is an emergency response project
to address the 2008 food crisis by providing immediate relief to food insecure households (and some flood
hit households), to build resilience of the vulnerable people in the medium-term, and build government
capacity to provide safety nets in the long-term.
Project Development Objectives: The project aims to enable the government help highly food-
insecure households to access more nutritious food in the short- term and also to create opportunities
for improved agriculture production in food-insecure districts in the long run.
Project description: SSNP takes a holistic approach through its components focusing on (i) immediate
relief to food insecure households through food- and cash-for-work programs; (ii) medium-term response
by supporting subsidization of transportation of seeds and fertilizers to food-insecure districts and the
development of seed varieties that are better suited to food-insecure areas; and (iii) a longer-term approach
through strengthening of the government’s cash transfer systems and piloting new approaches to
improving the nutritional status of women and children. The Ministry of Federal Affairs and Local
Development is the key implementing agency, with various components implemented by Department of
Agriculture, the National Agricultural Research Council, and the Poverty Alleviation Fund, and technical
support from World Food Program
Results: Since its initiation, the project has supported over 3 million people. Under the food and cash- for-
work program over 34,000 metric tons (MT) of food has been distributed and US $3.2 million has been
disbursed as cash. Over 98 percent of the supported households are reported to have increased their ability
to meet their food needs. In addition, since 2010, the Nepal Agriculture Research Center has produced over
129.38 MT of breeder seeds and 1,654 MT of foundation seeds, including seeds of varieties that are
better suited to food-insecure areas. A total of 11,214 MT of fertilizers and 783 MT of seeds of improved
varieties of paddy, wheat and maize have been made available in remote districts of the country. To date,
the project has directly benefitted over 168,263 individuals, of whom 58 percent are estimated to be women.
Some progress has also been made on components that support systems strengthening for cash transfers
and on the Community Challenge Fund for nutrition.
Current project status: Most of the components are near completion with over 87 percent of project funds
now disbursed. Pilot projectss to test approaches for improving the cash transfer and safety net systems in
Nepal have recently started implementation. This is an important strategic area and the government has
requested a one-year extension to enable completion of the pilot activities. The project will require a
restructuring to cancel about US$5.3 million and allow revisions in the project targets and results matrix.
Key partners: World Food Program
NEPAL URBAN GOVERNANCE AND DEVELOPMENT PROGRAM: EMERGING TOWNS PROJECT
Introduction: The project marks the re-engagement of the World Bank in the urban sector in Nepal after
an absence of more than 10 years. It aims at developing a sustainable approach for strengthening the
planning, implementation, and revenue-raising capacity of six emerging towns (each 30,000-70,000
population) located in the Western and Eastern regions of Nepal. The municipalities have been selected
based on their growth potential and their strategic location along the North-South transport corridors
(highways).
Project Development Objectives: The original goal was to improve delivery and sustainable provision
of basic services and priority infrastructure in the participating municipalities. A project restructuring
(submitted to the Board on July 8) realigns the goal to improving the institutional capacity of the
municipalities, helping them better plan, implement and fund urban development activities.
Project description: The project has three components: (i) strengthening municipal planning capacity
through provision of grants to the municipalities; (ii) provision of financing for municipal infrastructure
sub-projects to improve municipal capacity to implement infrastructure investments; and (iii) institutional
development and project management support to the participating municipalities and project agencies.
Results Achieved: The project experienced significant implementation delays in its first year. There has
been recent progress with the preparation of the municipal sub-projects. Two municipal sub-projects are
ready to enter the construction phase, and procurement notice for a third sub-project has been published.
The appraisal for two sub-projects will be completed in July 2013 and Detailed Project Reports for all
municipal sub-projects are expected to be ready by September 30, 2013. The municipalities have utilized
the municipal grants to carry out small works such as road upgrading, with at least 35 percent of these
grant resources earmarked towards activities benefiting women and the disadvantaged groups.
Current Project Status: The project has experienced significant implementation delays since approval.
Proactive measures have been taken to address the shortcomings including: (i) establishing effective
institutional and coordination mechanisms, (ii) finalizing the pipeline to advance preparation of the
municipal infrastructure sub-projects, (iii) building implementation capacity of the Project Coordination
Office and the Town Development Fund, which provides loans to municipalities for infrastructure
projects, and (iv) provision of adequate staffing in the Project Coordination Office. The recent project
restructuring has been completed to realign the outcomes and results framework to the institutional
capacity of the municipalities. It also proposed a reduction in project scope with a cancellation of $6.6
m i l l i o n for the municipal infrastructure sub-projects to reflect the lower than expected borrowing
and implementation capacity of the municipalities. In line with the new project objective, the
restructuring proposes to fund enhanced institutional development support for the six municipalities.
Key Partners: GIZ (parallel financing to phase out in June 2014).
NEPAL: ENHANCED VOCATIONAL EDUCATION AND TRAINING
Introduction: With a growing youth population and rising unemployment, the Government of Nepal is
implementing programs to improve access to technical education and vocational training for the poor and
disadvantaged youth. This first IDA technical and vocational training project contributes to government’s
programs by reaching out to more than 70,000 youth, adopting appropriate targeting tools and other inclusive
processes.
Project Development Objectives: The Project’s goal is to expand the supply of skilled and employable
labor by increasing access to quality training programs, and by strengthening the technical and vocational
education and training system in Nepal.
Project description: The project consists of the following components: (i) Strengthening technical education
and vocational training regulatory activities and capacity building; (ii) Strengthening technical education; (iii)
Support for short-term training and recognition of prior learning; and (iv) Project management and
monitoring and evaluation. The project is providing short- term training, stipends to students for technical
education, and performance-based or matching grants to technical institutes. The project also has provisions
for certifying existing skills gained through informal methods, and for creating a larger pool of trainers in the
country.
Results Achieved: After a significant start up delay, all project components are now moving ahead. Progress
in the key performance indicators include short term training of 7,000, testing and certification on preexisting
skills of over 2,000 youths by the National Skills Testing Board, and 60 institutions have been selected for
support through matching and/or performance grants.
Current project status: A total of 203 skills test managers, 520 lead and assistant trainers, and 2,506 skills
test assessors have been trained. The Council for Technical and Vocational Education has initiated work on
the establishment of a Training Management Information System, a n online system for affiliation of
training providers, and examination evaluation. About 1,865 students are currently receiving scholarship
support, while around 1,500 will be selected this year. Voucher-based financing support is being provided to
1,350 youths who are undergoing short-term training. A decentralized, operational management information
system is currently being used as the main tool for project monitoring. This is a problem project. Despite the
progress noted, disbursements remain very low. Agreement has been reached with the government to
restructure the project, focusing on the reallocation of funds across components, and substantial cancellation
of funds.
Key partners: None.
SOUTH ASIA: NEPAL INDIA REGIONAL TRADE AND TRANSPORT PROJECT
Introduction: Nepal is a geographically small landlocked country and its transport infrastructure is poor,
leaving many communities with limited access to local and international markets. As a consequence,
transport costs are high and Nepal is almost completely dependent on India for transit routes. Despite its
proximity and deep economic relations with India as well as China, Nepal’s trade outcomes have been
poor. Accordingly, there is an urgent need to improve export competitiveness and reduce the cost of imports.
Project Development Objectives: The Nepal-India Regional Trade and Transport project (NIRTTP) is
designed to decrease transport time and logistics costs for bilateral trade between Nepal and India and
transit trade along the Kathmandu-Kolkata corridor for the benefit of traders by reducing key infrastructure
bottlenecks in Nepal and by supporting the adoption of modern approaches to border management.
Project description: The project components are: (i) modernize transport and transit arrangements between
Nepal and India; (ii) strengthen trade-related institutional capacity in Nepal; and (iii) improve select trade-
related infrastructure, which entails expanding and upgrading the Narayanghat-Mugling road section, building
a container freight station in Kathmandu, and upgrading the inland container depots at Birgunj and
Bhairahawa. The project is a joint Bank and IFC project, and it is the first regional IDA project in trade and
transport in South Asia. One of the innovative designs of the project is its corridor approach (i.e. the
Kathmandu-Kolkata corridor), which focuses implementation efforts on one particular geographical area while
addressing multiple sources of congestion. The Bank and the Government of Nepal have also developed an
elaborate system to collect data to monitor the performance of the corridor and measure the efficiency of the
supply chains according to three main dimensions: costs, time and reliability.
Results: The expected outcome is a reduction of transport time and logistics costs for Nepal’s international
trade to be achieved through reductions in (a) time associated with meeting regulatory requirements for
import, export and transit activities, (ii) border crossing time at Raxaul-Birgunj border post, and (iii) total
time between cargo offloading at Kolkata to arrival at Birgunj by road and rail and Birgunj to Kathmandu
for trucks. Reducing trade costs will deliver significant benefits for consumers and traders, and will impact
positively on export competitiveness including through lowering the costs of intermediate goods and raw
materials. Lower trade costs would also be reflected in lower retail prices for consumers.
Current project status: The project was declared effective on September 10, 2013.
Key partners: IFC, DFID, GTZ
NEPAL: SECOND HIGHER EDUCATION PROJECT
Introduction: Higher education in Nepal is provided by nine universities and four health academies,
governed by separate Acts. The Ministry of Education and the Ministry of Health and Population are the
focal ministries for universities and health institutions. IDA has been a key partner supporting higher
education through the First Higher Education Project, t h e Engineering Education Project, and the Second
Higher Education Project.
Project Development Objectives: The Second Higher Education Project aims to (i) enhance the quality,
efficiency, and relevance of higher education through a set of systemic reforms and incentives to selected
institutions; and (ii) improve access for academically qualified students from disadvantaged groups in higher
education and higher secondary education.
Project description: The project has four components: (i) Reform grants and research funding; (ii) Student
financial assistance; (iii) Higher secondary education; and (iv) Strengthening system capacity. The first
component includes incentive grants, performance grants, and matching grants to participating universities and
colleges. Student financial assistance seeks to overcome the constraints being faced by meritorious girls and
disadvantaged groups. The second c omponent supports higher secondary education to permit better
functioning of universities by phasing out Proficiency Certificate Level programs from universities and
colleges. The third component seeks to enhance the capacity of the University Grants Commission and the
Ministry of Education to improve the quality of higher education through monitoring and evaluation, policy
analysis and reviews. The project is supporting higher education policy reforms in the area of autonomy,
quality assurance and accreditation, poverty targeting, and the development of a higher education policy.
Results: Key achievements include autonomy for four university campuses affiliated with the Tribhuvan
University and decentralization of 49 campuses. Nine institutions have already received accreditation. Twenty-
one new market relevant programs have been introduced under Tribhuvan University, with 15 papers published
in refereed journals and 36 in professional journals. Girls’ share in higher education enrolment has risen to 46
percent while the educationally disadvantaged dalits’ and janjatis’ share has risen by over 16 percent.
Enrolment in project supported Higher Secondary Schools has reached 208,468, with gender parity achieved,
and enrolment share of extremely disadvantaged groups rising to over 7 percent. Over 8,300 needy students
have received scholarships. Targets have already been surpassed in all of the above result areas. The
Proficiency Certificate Level has been phased out from the Tribhuvan University. And the Higher Education
Management Information System has been developed. Significant progress has also been made towards
developing the Higher Education Policy, with the first draft expected in 2013.
Current project status: The project, closing in January 2014, is maintaining a steady pace and is expected to
accomplish most of its objectives. Strong ownership and commitment from the government to continue with
institutionalization of the reforms is reflected in the recent request for continued higher eeucation support from
IDA. A request for extension of closing date has been received, which is being reviewed. The government has
also requested a follow on project.
Key partners: None
NEPAL: SCHOOL SECTOR REFORM PROGRAM
Introduction: The School Sector Reform Program is a government initiative that aims to enhance access to
and improve the quality of education. It covers Grades 1–12 as well as Early Childhood Education and
Development and non-formal education. The School Sector Reform Program focuses on basic education to
achieve the education MDGs by 2015. It is being implemented through a Sector Wide Approach, with
financial contributions from the government and a dozen development partners, including the World Bank.
Project Development Objectives: The project aims to support the government’s School Sector Reform
Program to increase access to and improve quality of school education, particularly basic education (Grades
1-8), especially for the marginalized groups.
Project description: The three main components of the program focus on (i) Basic education (Grades 1-8),
(ii) Secondary education (Grades 9-12), and (iii) Strengthening institutional capacity. The program finances
both the recurrent and the development expenditures for school education, focusing on School Sector
Reform Program’s three pillars of enhancing access, promoting inclusion, and improving quality. It supports
the following areas for the three pillars referenced above: (a) Basic education, including childhood education
and development and literacy, and lifelong learning; (b) Secondary education which includes technical
education and vocational training; and (c) Institutional capacity strengthening for delivery and monitoring of
educational services and products. The key policy reforms being supported include increased community
management of schools, public private partnership for improved delivery of textbooks, and improved learning
outcomes through establishment of a standardized student assessment system.
Results: The program has made good progress across its four performance indicators: (a) net enrollment
rate (NER) for basic education, (b) basic education completion rate, (c) gender parity index (GPI) for basic
education, and (d) the completion of learning assessment for grade 8 students. Starting from a baseline of 73
percent, the NER for basic education has increased to 87.5 percent, surpassing the end of program (2013/14)
target of 85 percent. Similarly, the completion rate for basic education has reached 60.8 percent. Nepal has
achieved gender parity in net enrollment for basic and secondary education with a GPI in NER of .99 at both
levels. The assessment of learning outcomes for grade 8 students has been completed and the draft final
report is publically available. Achievement tests for Grades 3 and 5 have also been administered.
Current project status: Original IDA financing was for five years (2009-2013). In June 2013, the Board
approved US $100 million in additional financing to support the three original components and fill the
financing gap in the remaining two years of the government’s School Sector Reform Program. It will also
support key quality, governance and accountability challenges in the school system.
Key partners: SWAp pooling partners: ADB, AusAID, Denmark, EU/DFID, Finland, Norway, UNICEF,
and Global Partnership for Education. Parallel financing was provided by Japan, USAID, UNESCO, and WFP.
NEPAL: EMERGENCY PEACE SUPPORT PROJECT
Introduction: A Comprehensive Peace Agreement from November 2006 and a 23 Point Agreement in
December 2007 included provision of allowances to individual Maoists in cantonments and relief and
rehabilitation to families of the conflict-affected. It was in this context that the Bank responded to a
request from the government to provide urgent support to the peace processes.
Project Development Objectives: The project aims to contribute to the peace process by providing interim
cash transfers and services to eligible conflict-affected groups, and by increasing transparency and
accountability in benefit delivery. It is expected that 14,800 families and 4,700 widows of those deceased
in the conflict will receive cash interim relief; 25,000 conflict-affected and their family members will
receive employability services, and at least half will be placed in the job market.
Project description: The project has three components: (i) rehabilitation support to conflict-affected
families and individuals; (ii) building the capacity of key institutions in support of the peace progress; and
(iii) project management. Rehabilitation support includes provision of employment and self-employment
services and psychosocial counseling services to conflict-affected people.
Results: The Ministry of Peace and Reconciliation has successfully completed a pilot for delivery of
employability services in 12 districts covering 3,030 conflict-affected persons, with a job placement rate
of around 60 percent. The first phase of the implementation covers 43 districts and 11,740 people. The
second phase will cover 18 more districts and another 10,000 conflict-affected people. The Ministry is
currently finalizing the guidelines for psychosocial counseling services. The project is facing challenges
in identifying beneficiaries for psychosocial services and may not be able to reach many beneficiaries.
With regard to cash transfers, 96 percent of the families of the deceased (14,200) and 98 percent of
widows (4,620) have received cash benefits, against a target of 95 percent.
Current project status: The project implementation is stable and it is expected to reach most of its
targets. About US$7 million may not be utilized by closing date mainly due to delays in launching the
psychosocial counseling services, and partly due to budget delays in FY13 and exchange rate gain
since approval. Project restructuring is planned by end-September 2013 to cancel associated amounts.
Key partners: International Organization for Migration is providing technical assistance to the
psychosocial counseling component.